1.Which of the following statements is true? A.Fixed costs are constant on a per

Question

1.Which of the following statements is true?
A.Fixed costs are constant on a per unit basis.
B.Variable costs per unit decrease as activity volume increases.
C.Variable costs are constant in total dollars.
D.Fixed costs are constant in total dollars.

2.A cost driver
A.is the same as a fixed cost.
B.is a variable that causes total costs to change.
C.is the same as margin of safety.
D.is a method of calculating mixed costs.

3A mixed cost
A.is fixed over a wider range of activity than a step cost.
B.is a fixed cost over the relevant range and a variable cost everywhere else.
C.contains both fixed and variable components.
D.always increases on a per unit basis.

4.A cost that changes, in total, in direct proportion to changes in activity levels is a(n)
A.absorption cost.
B.contribution margin
C.fixed cost
D.variable cost

5.The difference between actual sales and the breakeven sales is the
A.contribution margin.
B.margin of safety.
C.profit.
D.cost behavior.

Explanation / Answer

1. Which of the following statements is true?

D. Fixed costs are constant in total dollars.

Note:

Fixed costs varies on a per unit basis.

Variable costs per unit are constant

Fixed costs per unit decrease as activity volume increases

Variable costs are increases in total dollars as activity volume increases

2)A cost driver

D. is a method of calculating mixed costs.

Note :

A cost driver is the unit of an activity that causes the change in activity's cost.

3)A mixed cost

C. contains both fixed and variable components.

Note :

Mixed Cost are mixture of Variable and fixed cost

4) A cost that changes, in total, in direct proportion to changes in activity levels is a(n)

D. variable cost

Note : Variable costs are increases in total dollars as activity of volume increases which is directly proportion to changes in activity levels

5. The difference between actual sales and the breakeven sales is the

B. margin of safety

Note : Margin of safety = Actual Sale - Break Even Sale

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